Journal Article

Carbon Abatement Costs: Why the Wide Range of Estimates?


Estimates of marginal abatement costs for reducing carbon emissions derived from majoreconomic-energy models vary widely. Controlling for policy regimes, we use meta-analysis to examinethe importance of structural modeling choices in explaining differences in estimates. The analysisindicates that particular assumptions about perfectly foresighted consumers and Armington tradeelasticities generate lower estimates of marginal abatement costs. Other choices are associated with highercost estimates, including perfectly mobile capital, inclusion of a backstop technology, and greaterdisaggregation among regions and sectors. Some features, such as greater technological detail, seem lesssignificant. Understanding the importance of key modeling assumptions, as well as the way the modelsare used to estimate abatement costs, can help guide the development of consistent modeling practices forpolicy evaluation.